More like No-HQ-ia —

With downgraded credit, Nokia sells and leases back HQ to raise cash

The company is slimming down as it refocuses on Windows Phone

Struggling handset maker Nokia has taken another step to stave off insolvency by selling its 48,000 square meter (about 517,000 square feet) corporate headquarters in Espoo, Finland to software consulting company Exilion for €170 million (about $220 million). According to Nokia's official statement, once the sale is complete the company will lease the space back and continue to work from there.

"We had a comprehensive sales process with both Finnish and foreign investors and we are very pleased with this outcome. As we have said before, owning real estate is not part of Nokia's core business and when good opportunities arise we are willing to exit these types of non-core assets," Nokia CFO Timo Ihamuotila, said. "We are naturally continuing to operate in our head office building on a long-term basis."

The move is the latest in a string of financial retreats for the once-strong company, which until this year was the world's dominant cellular phones vendor. However, Nokia has withered under continuous broadside salvos from its competitors, especially Apple, Samsung, and Google, and has suffered through credit downgrades and outright derision from shareholders (including a not-quite-tongue-in-cheek accusation of insanity by blogger and tech author Tomi Ahonen). Nokia's commitment to the Windows Phone ecosystem remains strong, and its latest Lumia offerings are solid, but Nokia is clearly in trouble, and things don't appear to be looking up any time soon.

According to the Wall Street Journal, Nokia's cash on hand is down more than half a billion euros from where it stood just six months ago. The sale of its corporate headquarters will pump a bit of cash back into its accounts, but it's best seen as part of a larger strategy; like a lizard shedding its tail to escape a predator, Nokia is hacking off as much of itself as possible so that it can focus on its core business of making money by selling handsets. For better or for worse, the company has tied itself firmly to Microsoft, and the success or failure of Windows Phone 8 will likely decide Nokia's ultimate fate.

Lee Hutchinson
Lee is the Senior Technology Editor at Ars and oversees gadget, automotive, IT, and culture content. He also knows stuff about enterprise storage, security, and manned space flight. Lee is based in Houston, TX. Emaillee.hutchinson@arstechnica.com//Twitter@Lee_Ars

81 Reader Comments

Well it is better than doing this to show short term profits. At least this is about using your resources to finance a troubled time, and not to pump the short term share price and making sure the officers get a nice big bonus.

Time to pull the plug, Nokia. The fact that they chose WP over Android clearly demonstrates that Nokia execs are living in some sort of alternate reality. End it now while you still have some dignity left.

I love Nokia's phone designs, I just wish they'd have the option of having Android on them. I'd buy one in a heartbeat.

Why? I thought about this too, but there's nothing in the Android space that lets Nokia stand out. In the Windows Phone ecosystem, they get to call shots through MS and are the flagship device of the entire platform.

Plus, they won't get to use their mapping systems, etc... which MS is paying for their use. Going to Android means further diluting their already poor value.

I love Nokia's phone designs, I just wish they'd have the option of having Android on them. I'd buy one in a heartbeat.

I wonder how true this would be considering the number of players already in the Android ecosystem. Samsung is dominating the other Android phone makers, and I'm not sure Nokia would really be any better off. Sure, there are a handful of people who would buy Nokia's phones with Android for their design and features, but would it overcome Nokia's cost for the time they would have to spend to get Android running?

I love Nokia's phone designs, I just wish they'd have the option of having Android on them. I'd buy one in a heartbeat.

They took a CEO ex-Microsoft. He shamed everyone and gave a nice option out of Microsoft. They went for it, they discontinued what they are doing and waited for Microsoft to finish their 7 version. The long wait hurt them badly, then had to hurt their first adopters when 8 came out soon afterwards.

The "all in" approach killed them with such a weak and self serving partner. Nokia didn't do their due diligence because of the CEO direction. It is so very sad.

What they should have done was keep their other products and keep them maintained and upgraded while waiting for Microsoft to take off. But this costs money and short term profit is the name of the game for new CEO's...slash costs and change direction. Helps that Microsoft gave them a fat check to make them the sole operating system.

I'm sure it seemed a sweet deal for the CEO. Get rid of the overhead of the operating system, no uncertainty, and something the CEO knew with the people he knew and supported.

Not sure it's all doom and gloom for Nokia. They have an extremely low stock price and are up from their previous price target of $2 to between $4 and $6 from many analysts. They suffer with a heavy short sell bias from the middle of the year however volume in trading has been abnormally high and they have been trending rather well the last few weeks.

General sentiment seems to be slowing shifting to their side, especially with rumors of potential buy out for patents. If it will last we will have to see but I wouldn't rule them out just yet.

Time to pull the plug, Nokia. The fact that they chose WP over Android clearly demonstrates that Nokia execs are living in some sort of alternate reality. End it now while you still have some dignity left.

Selling your own facilities to lease them back is like peeing in your pants for warmth in Winter.

Real estate is a capital investment that like all investments can, and should, be liquidated when the time is right. There's nothing special about owning a HQ building that a company needs to survive, especially when it has significant money tied up in the privilege of that ownership.

Selling your own facilities to lease them back is like peeing in your pants for warmth in Winter.

++ It's a very shortsighted move.

When you are bleeding cash at epic levels, you have to be kind of shortsighted. Who cares if cost structure is slightly higher in next year if you're in bankruptcy next year because you ran out of cash? I'm not exactly sure Nokia could take out a line of credit at this point, or sell a bond at any price they'd want to pay back.

Selling your own facilities to lease them back is like peeing in your pants for warmth in Winter.

++ It's a very shortsighted move.

Meh, it's very common. Scotiabank, a Canadian company which is certainly not hurting for money in any way recently sold their landmark Scotiabank tower in Toronto for about a Billion dollars in order to keep renting it from the people they sold it to.

General sentiment seems to be slowing shifting to their side, especially with rumors of potential buy out for patents. If it will last we will have to see but I wouldn't rule them out just yet.

Who's going to buy them for patents? They've already taken their big shot at Apple, no successor will be able to use the same patents to do that again.

If, as .milFox suggests, Nokia becomes a non-practicing entity, the only thing they'll have left is the ability to sue the crap out of anyone they haven't established licensing agreements with. I would assume they must have licensing / cross licensing agreements with all the big players by now, in which case there wouldn't be much value left there.

Either Nokia returns to selling phones people actually want to use or they're cooked.

It's actually scary to watch a former communication giant going down slowly but steadily, as a mere five years ago the majority of phones in stores were Nokia's. Samsung, SonyEriccson, Siemens, Alcatel? Don't be ridiculous, Nokia phones are the best ones! Back then, Nokia was as strong in the phone market as Microsoft is on desktops with its Windows. Imagine Microsoft selling their HQ in Redmond -- that's how weird this is.

This is sad, but it's the latest sign of a disaster. $220 million is not very much money for a company that has more debt than cash. They are burning through that cash at a much higher rate than this amount per quarter. So this isn't enough to give them more than about a month to six weeks of cash, from their present rate of burn-through.

I can't imagine what the thinking must be now in that headquarters. Unless they been heavily working on Android phones for a year now, they won't have enough time to come up with any if they decide they need to, unless they just use their current phones, and slap the OS inside. Win Phone isn't increasing sales at nearly a high enough rate to overcom the lessened sales of their feature and dumb phone lines around the world.

They've got several billion due in early 2014, which may seem to be a long time from now, but isn't. It isn't thought that they will be able to meet the obligation. So unless they can somehow convince the creditors to extend that loan, they could be finished. But in order to do so they will have to show a seriously improved business. They also have several billion more due in 2016. That will affect their ability to meet any revised conditions set for a hopefully enlongated term for the current debt due in 2014. I hope they can make it.

Meh, it's very common. Scotiabank, a Canadian company which is certainly not hurting for money in any way recently sold their landmark Scotiabank tower in Toronto for about a Billion dollars in order to keep renting it from the people they sold it to.

Common when you need cash:http://www.theglobeandmail.com/globe-in ... le4209502/"Scotiabank put the Bay Street tower up for sale in January. Faced with having to drum up more capital to backstop its lending operations to comply with new global banking regulations, the sale of the building was a way for Scotiabank to raise money without having to sell off core banking assets."

Clearly the Nokia move is one of desperation. IIRC Nortel did similar before the end.

Selling your own facilities to lease them back is like peeing in your pants for warmth in Winter.

++ It's a very shortsighted move.

Meh, it's very common. Scotiabank, a Canadian company which is certainly not hurting for money in any way recently sold their landmark Scotiabank tower in Toronto for about a Billion dollars in order to keep renting it from the people they sold it to.

It depends on how much is gotten, and how badly the money is needed. It also depends on whether it will really help. In this case, it's not a lot of money, they need it very badly, but it won't help.

I love Nokia's phone designs, I just wish they'd have the option of having Android on them. I'd buy one in a heartbeat.

Why? I thought about this too, but there's nothing in the Android space that lets Nokia stand out. In the Windows Phone ecosystem, they get to call shots through MS and are the flagship device of the entire platform.

Plus, they won't get to use their mapping systems, etc... which MS is paying for their use. Going to Android means further diluting their already poor value.

That said, I have a Lumia 920 and I'm really loving it.

This is exactly the argument that Nokia has been making, and it's completely nonsensical circular logic.

Using Windows Phone only sets them apart as long as Windows Phone is a failing platform.

Other manufacturers do have the ability to make Windows Phones. If it ever actually gains market share, the other manufacturers will start making phones for it just like they do for Android and Nokia will be in exactly the position that you are describing, unable to differentiate themselves.

The one advantage that they have with Windows Phone is that it is a worse platform than Android. More deficiencies in the platform give them more opportunities for improvements (i.e. Nokia Maps), but I'd like to see someone openly make the argument that they are sticking with Windows Phone because it sucks more than Android.

Selling your own facilities to lease them back is like peeing in your pants for warmth in Winter.

++ It's a very shortsighted move.

Meh, it's very common. Scotiabank, a Canadian company which is certainly not hurting for money in any way recently sold their landmark Scotiabank tower in Toronto for about a Billion dollars in order to keep renting it from the people they sold it to.

Indeed. Selling the asset allows them to post the value of the sale as cash and even reduce their tax bill (depends on accounting rules in Finland - because of a reduction of net profit through the increase of financial expenses). They might have an option to buy the asset at the end of the lease. In short, they are trading an asset for financial expenses which is nice to have.

And if the company is hurting, this is just good timing. It allowed them to generate liquidity at an acceptable price whereas if they had waited to be in really dire straits, they would probably not have been able to command such a high price for their asset.

Why? I thought about this too, but there's nothing in the Android space that lets Nokia stand out. In the Windows Phone ecosystem, they get to call shots through MS and are the flagship device of the entire platform.

If they're the flagship, why is their phone called the Lumia and HTC's phone called the Windows Phone?

There's no reason someone with Nokia's expertise in the phone industry couldn't release both Windows Phone and Android handsets. If Windows Phone was suddenly very successful, do you think Samsung wouldn't put the same effort into that platform that they currently put into Android?

Current "core" Nokia business is about making LOSS by selling handsets.

Sad. Nokia had PLENTY of opportunity to sell profitable handsets. Press advised consumers to travel abroad to get N9! N95 won design awards while competing with iPad! Pure808 was selling out, but Nokia failed to predict demand because EVERYBODY know Symbian is outdated/outteched/unprofitable....

Lots of opportunities to earn cash. All lost.

Nobody can really claim that Nokia would be better of NOT earning cash. Pursuing strategy of abandoning profits was and is plain wrong.

Looking forward to the 920 when it's back in stock. It seems to have some momentum it lacked in the 900 release. The new Win 8 OS, great phone (920), a general waning of Interest in iOS. All these things can only help. Time will tell...

If I was a betting man, I might go pick up some of their stock. But, I got Sony stock earlier this year, so I don't do that anymore... :-/